Hungary's economy

Has Orbán over-reached?

ALARM bells are ringing ever louder in Hungary. Since winning an unprecedented two thirds parliamentary majority in April's election, the ruling Fidesz party has systematically taken over the country's previously independent institutions: the presidency, the state audit office and the media council are now all run by party placemen and women. Last week parliament voted to severely restrict the constitutional court's right to adjudicate on budgetary matters. The government even wants to force investors in private pension schemes back into the state system to meet budget targets. Refuseniks could lose up to 70% of their pensions.

But the latest power grab may be a step too far. A Fidesz MP, József Varga, has introduced legislation to cut the budget of the Fiscal Council, the independent watchdog charged with monitoring the budget, from 835m forints ($4m) to 10m, in effect killing it off. Mr Varga says the funds should be diverted towards measures to help integrate Hungary's Roma minority. (The MP says he has no view on whether the Council should exist or not, but he is sure that its members are “well-paid bankers”.)

The move has sparked anger and confusion. Not from the political opposition, which remains weak and fractured, or the public, among whom the government retains overwhelming support. The problem is the potentially destabilising message to the markets: Hungary will no longer enjoy any credible independent domestic oversight of fiscal policy. That will erode investors' confidence—already battered by the imposition of “crisis taxes” on the banks, telecommunications, energy and retail sectors—and could trigger a slide in the value of the forint.

That in turn will directly hit voters' pockets: half of Hungary's household debts, totalling $26.5 billion, are denominated in Swiss francs. The nationwide enthusiasm for the government's self-proclaimed regime of “national co-operation” may fade, quickly, once the costs of its policies are felt. So investors are unsettled. Eleven ambassadors representing Hungary's largest investors recently invited Viktor Orbán, the prime minister, to lunch to discuss his government's economic policies and the commercial environment.

György Kopits, the Fiscal Council's president, told Világgazdaság, Hungary's business daily, that the move to abolish the council was reminiscent of Hugo Chávez's Venezuela, and would destroy “a useful institution and valuable intellectual capital”. As Hungarian Spectrum, a liberal blog, argues, Mr Kopits, a well-regarded economist who has put in stints at the US Treasury and the IMF, is precisely the kind of independent-minded and internationally credible figure that is desperately needed in Hungarian public life, much of it filled with dreary party hacks.

Mr Kopits's sin, it seems, was to draw attention to an anomaly in the plans for the crisis taxes. Mr Orbán said that they would remain in effect until January 1st 2013. Mr Kopits noted a clause in the 2011 budget which stated they would last until the end of 2014, although with reduced revenue targets. But like Mr Chávez, Mr Orbán apparently has little tolerance for informed criticism.

@AMZ 49: Yes, it is important to create jobs, increase the tax-paying population, decrease state debt and fight corruption. Greater state control of the economy – Fidesz’s chosen path – will make these problems worse, not better.
Your belief that the government is interested in compensating people for their stole pension funds is touchingly naïve. The government hasn’t thought through what it’s doing – Matolcsy couldn’t explain his plans to the pension fund managers when he met them yesterday, because he doesn’t have any. This is improvised, on-the-hoof economic management, leading to I don’t know where, but the government certainly doesn’t know, either.
Sure, people voted for change, That does not give the government – any government – the right to rip up the rule books and send the referee away, as they’ve done with the Constitutional Court and now the Fiscal Council.
And, returning to the gist of the story, what is the benefit to the state of getting rid of a disinterested overseer of the state finances? And what the benefit to the ruling party?
"Checks and balances" did not create Hungary’s economic problems – and it is highly deceitful of Fidesz to suggest that they did – bad governing created problems, problems which the Bajnai government was addressing quite well.
Sound fiscal management is terribly boring and not at all popular in Hungary, and is much less fun than hitting up multinationals for money. But that is not a sustainable policy. Where are the government’s promised one million jobs going to come from if not foreign investors? SMEs, is what the government answers. But this is a government that would have the people believe in Santa Claus.

The easiest way to understand the leadership of the ruling party is
maffiosi in power. They just nominated the old-new Attorney General, a Fidesz Party faithful, for 9 years for that position again.
(why 9? Well, 4 years of Fidesz rule + 4-5 years of statute of limitations. At his previous stint, 2000-2006, he prevented any investigations into Fidesz's financial activities while in power before 2002. The other 9 year job they just created is a Media Tzar.
She has absolute power media, including taking away frequency from
opposition radio and TV stations next Spring.

They changed the laws/constitution to appoint, without the previously required consensus, the justices of the Constitutional Court, members of the Monetary Council of the Central Bank.

One of their first step was to change the Election Commission to
prevent the opposition to start public referendums. I do not think
there will be another free and fair election in Hungary for long time.

Hungary became the first dictatorship in the EU in the new century.
Hungary had the first dictatorship after WW1, before
Mussolini or Hitler. Let us hope history does not repeat itself

Has Orbán over-reached? No, he has not; at least not yet.
We have huge problems: unemployment, ageing population, debt trap, health care, pension system, corruption. Other countries have problems like these, but it is no consolation to us.
It cannot go on this way any longer: all the parties but one in the Hungarian Parliament got there with the promise of thorough changes in political practices.
Now, we have the change. The administration promised to create jobs and have the lowest budget deficit since year 2000, when Fidesz was the governing party.
Sure, they slash all opposition to their intents. All the „checks and balances“ did not hinder the previous governments to steer the country into fiscal, political and social turmoil.
To nationalize the private pension funds is steep, but the owners must be compensated one way or other, because no government can afford 3 million (almost half the electorate) angry voters during an election, which will take place in 2014.
It is the economy that counts: create jobs, increase tax-paying population, decrease state debt, fight corruption.
If Fidesz fails, it will be voted out of office – there is no time to loose.
And, they seem to understand that quite well.

Orban is up to his Populist tricks;Populism in all it's different forms and in every country always offers magical solutions,that is why it is so popular. I am afraid that Hungarians are under a bad Harry Potter
"spell". Misi bacsi Portland,Oregon USA

The events in Hungary are developing very fast, resembling the "year of turn" (1948) when Rakosi ("the best Hungarian pupil of Stalin") grabbed the absolute power: now Orban does that, abusing the 2/3 majority that he got with the 52% of votes in the non-proportional election system. Orban is a prototype of the short monomaniac dictators, a "mini-duce", who does not understand any arguments except the brute force. He simply cannot accept that the things going not along his will - then he tries again, and again, in that and another manner. What he represents has already been named "hungaroputinism" by some observers - indeed, he may be called the best Hungarian pupil of Putin. Tricky, agressive, mad. Pure Hungary!

Im Hungarian and believe me Viktor Orbán is the best thing that could of happened to Hungary right now.
He is proper statesman backed by the country's 2/3.
He knows exactly what he does.So dont you worry people.
Hungary was in an awful situation when Mr.Orban got in power earlier on this year.The former lefty-liberal governments between 2002-2010 just borrowed borrowed and borrowed pushed the nation into a huge debt.Also this lefty-liberal government was involved in numerous corruption scandals!!!
The biggest challenge is to get the nation on its foot not just financially but morally as well.
And Mr Orban&co are the best persons for the Job.With The Conservative Right Wing Christian Values That Orban Represent Surely The Only Way Is Up For Hungary. We Know It Wont Happen Overnight But We Are Happy With What Orban Done So Far.
So dont worry once again.We are doing fine!!

Apart from the obvious disregard for democracy and due process and equality before law that the nationalisation of private pension funds means (discussed in length below and elsewhere), another side effect of this move is to remove what little savings propensity Hungarians still have through private pensions. We start going back to communism, where the state gives everyone a living (meager it may be). The message: don't save for your pension, your money is in better place in our (the government's) hands, we'll take care of you. From what income? the demographic bomb is ticking whatever the Hungarian government says or does. So it is a gross lie...

I am afraid Hungary is well on it's way to being the poorest and most backwards country in the EU. Venezuela and Belarus, here we come, save us a seat!!!

I know csomba, but the pensions story is way worse even than this one so I'd expected a bit more info. But I now see there is a piece on the appropriation of pensions, as well, all the better, I get two stories rather than one.